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This introductory chapter provides an overview of how political representation occurs on government spending decisions—one of the most consequential powers of government. Political representation in Congress is, in large part, about how elected officials decide how to spend federal money. While a large literature analyzes how district expenditures affect support for congressional incumbents, it remains unclear how constituents hold legislators accountable for expenditures—how constituents attribute spending to legislators, how constituents evaluate those expenditures, and how constituents reward or punish legislators for spending on projects. One reason for this lack of clarity is that constituents are unlikely to learn about the projects on their own. However, constituents' inability to track spending is not an indictment of their democratic competence. Instead, it reflects the many activities representatives perform and the subtle ways that federal expenditures occur.

How did America’s executive branch come to dwarf the legislative branch? This chapter surveys more than two centuries of American history to show how executive empowerment has primarily been driven by decisions made by Congress itself. In the Constitution’s first century, the federal government grew steadily, but remained quite small and geographically decentralized by modern standards. In the first half of the twentieth century, Congress caused America’s central government to grow exponentially, especially in terms of manpower, while seeing to its own development considerably less. In post-war America, the federal government has developed increasingly complex ways of expanding its reach without expanding its manpower, overseen by a Congress that at first seemed determined to master the executive branch but that in recent decades has allowed itself to stagnate. In addition to offering a narrative account, the chapter tracks some crude metrics, such as the ratio between the number of employees in the two branches, to show what an immense task Congress now faces when trying to oversee the vast, shape-shifting network of specialized executive organs.

This chapter presents the guidelines for efficient taxation and debt financing. It also outlines the principles for efficient federal government spending within a federal public economy. Efficient tax policy should seek to minimize horizontal spillovers between local and provincial economies and vertical spillovers between the central and provincial and local governments. Efficient debt policy should seek to align debt payment to future benefits and control possible abuses of local borrowing via balanced-budget rules. Efficient spending focuses on the essential federal task of designing intergovernmental transfers, stressing when matching and lump-sum grants-in-aid are most appropriate to manage public goods, spillovers between states, and the provision of social insurance for differential income shocks across regions, states, or localities.

This chapter explores the history of federal R&D and procurement support for the development of key industries in the IT sector. Procurement with R&D programs is valuable to this study due to the fact that the positive effects of federal spending on industry structure and technology diffusion were due to procurement and not R&D programs. Second, technology development and technology diffusion through the expansion of markets cannot be divorced from a discussion on financing of innovation. The chapter then argues that the rapid growth of U.S. firms in the computer hardware or semiconductors industries was largely due to public R&D and procurement programs. Finally, the chapter also discusses the effects of the federal financing of innovation in IT, and how though it may show consistency with the market failure analyses of Arrow and Nelson, there are certain limitations to these analyses.

This chapter examines the political debates that accompanied the passage of the first of the Vietnam-era G.I. Bills, the Veterans' Readjustment Benefits Act of 1966. It considers the role of Senator Ralph W. Yarborough, a Texas Democrat, in pushing for a new G.I. Bill that would compensate all citizens called upon for military service and the opposition he faced from fellow Texan Democrat Olin Teague in the House. In particular, it explains how the Vietnam War helped Yarborough's cause, resulting in the Veterans' Readjustment Benefits Act that gave the same benefits to all Cold War veterans. It also discusses the arguments of President Lyndon B. Johnson regarding federal spending and his eventual signing of the bill into law. Finally, it reflects on the significance of the 1966 G.I. Bill with respect to veterans' benefits and to democratic citizenship more generally.